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Trade secrets: New EU rules in force in Italy

The Italian legal system was already at the forefront of trade secret protection, affording twenty years’ protection to both commercial and manufacturing and industrial-technical trade secrets, in full compliance with the 1994 Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs). This meant that the Italian legislator did not need to make major changes to the existing legislative framework. There are however some interesting changes to report.

NEW DEFINITION: “TRADE SECRETS”

The Italian Industrial Property Code (IPC) already provided for the protection of business information and technical-industrial experience as long as:

a) they were secret, meaning they were not generally known or not easily accessible to experts or sector operators; b) they had commercial value because they were secret; c) they had been subject to reasonable steps to keep them secret.

Although the Directive has not impacted scope of protection, such know-how is however now captured with the term “trade secrets”.

INCREASE PROTECTION

Under the existing regulation, trade secret holders were already entitled to prevent third parties from unlawfully acquiring, disclosing and using trade secrets unless said third party had obtained them autonomously without infringement.

This provision has been broadened under the Directive, which now punishes third party negligence.

In short, the acquisition, use or disclosure of a trade secret is unlawful if the recipient knew – or should have known – that it had been obtained from someone who was using/disclosing it unlawfully.

Producing, offering or placing on the market of infringing goods – or the importation, exportation or storage of infringing goods for those purposes- also amounts to the unlawful use of a trade secret if it was known – or should have been known – that said trade secret had been used unlawfully.

TIME LIMITS

All rights and actions concerning the protection of trade secrets now have a prescriptive period of five years.

This term will impact actions concerning trade secrets unlawfully disclosed in breach of contractual obligations, whose general limitation period would otherwise have been ten years.

CONFIDENTIALITY IN THE COURSE OF LEGAL PROCEEDINGS

One of the most interesting innovations concerns the protection of trade secrets in the course of legal proceedings.

If requested by a party, judges are now entitled to prevent individuals that are party to legal proceedings concerning the unlawful acquisition, use or disclosure of a trade secret from using or disclosing the disputed trade secret. In particular, judges will have the possibility of restricting access to documentation containing trade secrets as well as restricting the number of people allowed to attend hearings.

CORRECTIVE MEASURES

When ordering the corrective measures already provided for by Italian law (including injunctions and/or the seizure and/or destruction of infringing goods), the judge must balance the opposing interests and take into account the specific circumstances of the case, including public interest (for example, the destruction of goods should not be ordered if there are other viable options, such as donations to charitable organisations).

Moreover, at the request of a party, as an alternative to the application of corrective measures:

– in proceedings on the merits and under certain conditions (including the lack of infringer’s negligence) the judge may order the payment of compensation, which cannot however exceed the sum that would have been due had the infringer requested authorisation to use the trade secret;

– in interim proceedings, the judge may allow the continuation of the alleged unlawful use (but not the disclosure) of a trade secret subject to the lodging of guarantees.

If precautionary measures adopted to protect trade secrets cease to be effective because of an action or an omission of their holder (including the failure to start legal proceedings on the merits), or if it is subsequently established that the offense did not exist, the claimant will have to compensate the damage caused by the measures. Under Italian law there is however no obligation to start proceedings on the merits if the provisional measure consists of a cease and desist of the use or disclosure of the trade secret.

Finally, new criminal sanctions have been introduced, including up to two years’ imprisonment in the event of the unauthorized acquisition or use of trade secrets; to respond to the call for a more severe punishment for hackers, the penalty is increased for cybercrime.

PRACTICAL ADVICE

In light of these legislative changes, the first step for companies wishing to exploit their trade secrets is to identify them properly in a timely manner. The company should then collect them in hard and/or soft copy in order to apply the appropriate confidentiality measures (for example, restricting access to information to a limited number of subjects – employees and / or business partners – who have accepted specific confidentiality undertakings). It is also advisable to roll out ad hoc corporate policies to ensure awareness of best practice regarding the proper handling of confidential information.

Before pursuing provisional measures to protect trade secrets companies should assess potential risk of having to compensate damage caused by the measures.

On the other side, companies intending to use information whose origin is uncertain should use appropriate contractual means to ensure that no trade secret is infringed in order to avoid falling into a negligent case of infringement.